BHA Investments, Inc. v. State

• Decision Date: 30 January 2003
• Docket Number: No. 28238.,28238.
• Citation: 138 Idaho 348,63 P.3d 474
• Parties: BHA INVESTMENTS, INC., an Idaho corporation, on behalf of itself and all others similarly situated, Plaintiffs-Appellants, v. STATE of Idaho, Alcohol Beverage Control Board, of the State of Idaho, Defendant-Respondent.
• Court: Idaho Supreme Court

63 P.3d 474

138 Idaho 348

BHA INVESTMENTS, INC., an Idaho corporation, on behalf of itself and all others similarly situated, Plaintiffs-Appellants, v. STATE of Idaho, Alcohol Beverage Control Board, of the State of Idaho, Defendant-Respondent.

No. 28238.

Supreme Court of Idaho, Boise, December 2002 Term.

January 30, 2003.

Davison, Copple, Copple & Copple, Boise, for appellants. Edward J. Guerricabeitia argued.

Hon. Alan G. Lance, Attorney General, Boise, for respondent. Victor A. Ramirez argued.

SCHROEDER, Justice.

This case involves the constitutionality of a liquor license transfer fee. When BHA Investments, Inc. (BHA) sold its liquor license, it was required to pay a transfer fee equal to 10% of the sale price to the State of Idaho (the State), pursuant to I.C. § 23-908(5). BHA paid the transfer fee under protest and filed suit in district court against the State, arguing that the transfer fee is a disguised and unconstitutional tax, a taking without just compensation, and an unjust enrichment for the State. The district court dismissed the case, finding no claim upon which relief could be granted. BHA appeals.

I. FACTUAL AND PROCEDURAL BACKGROUND

On July 17, 2000, BHA sold an Idaho State liquor license to Power House, LLC for $115,000.00. BHA notified the State of Idaho Alcohol Beverage Control Board of the sale. The State instructed BHA to submit an application for transfer to the Director of the Idaho State Police, who would investigate the application and license transfer pursuant to I.C. § 23-908(2) and I.C. § 23-907. BHA was also told that it must pay 10% of the license transfer sale price to the Director of the Idaho State Police as a "transfer fee" pursuant to I.C. § 23-908(5). The Director approved the license transfer, and BHA submitted the transferred license to the City of Boise. BHA paid the transfer fee of $11,500.00 to the State under protest and filed a complaint in district court. The State answered and filed a motion to dismiss for failure to state a claim on which relief could be granted. BHA appealed.

II. THE TRANSFER FEE IS VALID

A. Standard of Review

This case comes to the Court on review of grant of a Rule 12(b)(6) dismissal for failure to state a claim upon which relief can be granted. In Bradbury v. Idaho Judicial Council, 136 Idaho 63, 67, 28 P.3d 1006, 1010 (2001), this Court stated the standard of review relevant to this case:

The Court's standard of review for an order of the district court dismissing a case pursuant to I.R.C.P. 12(b)(6) is the same as the summary judgment standard of review. See Coghlan v. Beta Theta Pi Fraternity, 133 Idaho 388, 398, 987 P.2d 300, 310 (1999)

; see also Orthman v. Idaho Power Co., 126 Idaho 960, 962, 895 P.2d 561, 563 (1995). After viewing all facts and inferences from the record in favor of the non-moving party, the Court will ask whether a claim for relief has been stated. Coghlan, 133 Idaho at 398,

987 P.2d at 310. "The issue is not whether the plaintiff will ultimately prevail, but whether the party is `entitled to offer evidence to support the claims.'" Id. citing Orthman, 126 Idaho at 962,

895 P.2d at 563,

quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90, 96 (1974) (citation omitted).

The constitutionality of a statute is a question of law. State v. Cobb, 132 Idaho 195, 197, 969 P.2d 244, 246 (1998). The party challenging a statute on constitutional grounds bears the burden of establishing the statute is unconstitutional and "must overcome a strong presumption of validity." Olsen v. J.A. Freeman Co., 117 Idaho 706, 709, 791 P.2d 1285, 1288 (1990).

This Court exercises free review over the trial court's conclusions of law to determine if the trial court correctly stated the principles of law and if the legal conclusions are supported by the facts as found. Nampa & Meridian Irrigation Dist. v. Washington Fed. Sav., 135 Idaho 518, 521, 20 P.3d 702, 705 (2001). The Court is "free to draw its own conclusions from the facts presented." Kootenai Elec. Coop. v. Washington Water Power Co., 127 Idaho 432, 435, 901 P.2d 1333, 1336 (1995).

B. The transfer fee for liquor licenses under I.C. § 23-908(5) is a valid fee.

BHA contends that the fee imposed under I.C. § 23-908(5) on those wishing to sell their liquor license is a disguised tax. Such a distinction is significant, BHA argues, because if the transfer fee is a tax, then it violates the uniformity and proportionality requirements for taxes as set forth in sections 2 and 5 of Article VII of the Idaho Constitution:

§ 2. Revenue to be provided by taxation.—The legislature shall provide such revenue as may be needful, by levying a tax by valuation, so that every person or corporation shall pay a tax in proportion to the value of his, her, or its property, except as in this article hereinafter otherwise provided. The legislature may also impose a license tax, both upon natural persons and upon corporations, other than municipal, doing business in this state; also a per capita tax: provided, the legislature may exempt a limited amount of improvements upon land from taxation.

§ 5. Taxes to be uniform—Exemptions.—All taxes shall be uniform upon the same class of subjects within the territorial limits, of the authority levying the tax, and shall be levied and collected under general laws, which shall prescribe such regulations as shall secure a just valuation for taxation of all property, real and personal: provided, that the legislature may allow such exemptions from taxation from time to time as shall seem necessary and just, and all existing exemptions provided by the laws of the territory, shall continue until changed by the legislature of the state: provided further, that duplicate taxation of property for the same purpose during the same year, is hereby prohibited.

Idaho Const. art. VII, §§ 2 and 5.

The state has plenary power over the traffic of liquor within the state of Idaho pursuant to the Idaho Constitution, which provides that "the legislature of the state of Idaho shall have full power and authority to permit, control and regulate or prohibit the manufacture, sale, keeping for sale, and transportation for sale, of intoxicating liquors for beverage purposes." Idaho Const. art. III, § 26. The legislature passed I.C. § 23-908 pursuant to the power granted by the Constitution. That section in relevant part states, "The fee for transferring a liquor license shall be ten percent (10%) of the purchase price of the liquor license or the cost of good will, whichever is greater; except no fee shall be collected in the following events: [exceptions not applicable in this case]." I.C. § 23-908(5).

In State v. Doherty, 3 (Hasb.) Idaho 384, 29 P. 855 (1892), this Court addressed the constitutionality of a State liquor license fee. The same provisions of the Idaho Constitution at issue in that case are at issue here—Article VII, Sections 2 and 5. After quoting the relevant constitutional and code sections, this Court stated:

We are of the opinion that the provisions of said sections of the constitution requiring equality and uniformity of taxation upon the same class of subjects do not apply to the license tax provided for in said section 4 of said act. No one can doubt (who reads the act in question) that the intention of the legislature, in its passage, was to regulate a traffic which was believed by them to be pernicious in its effects upon society, and not for the purpose of raising revenue. The principal object was to regulate such traffic, not to raise revenue. The constitutional provision in regard to equality and uniformity of taxation has reference solely to "taxation," pure and simple, according to the commonly accepted meaning of that term, for the purpose of revenue only. It does not apply to those impositions made under the police power of the state, as a means of constraining and regulating a business that may be regarded as evil in its effects upon society. In Burroughs on Taxation (page 147) it is stated that the provisions of the constitution as to equality and uniformity of taxation do not apply to licenses. (See, also, 1 Desty on Taxation, 305, note 5; 2 Desty on Taxation, 1385 et seq.; Fahey v. State, 27 Tex.App. 146, 11 Am. St. Rep. 182, 11 S.W. 108 [(1889)]; Allentown v. Gross, 132 Pa. St 319, 19 Atl. 269 [(1890)]; Pleuler v. State, 11 Neb. 547, 10 N.W. 481 [(1881)]; East St. Louis v. Wehrung, 46 Ill. 392 [(1868)]; People v. Thurber, 13 Ill. 554 [(1852)]; Wiggins Ferry Co. v. East St. Louis, 102 Ill. 560 [(1882)]; Distilling Co. v. Chicago, 112 Ill. 19, [1 N.E. 166 (1884)]; New Orleans v. Railroad Co., 41 La. Ann. 519, 7 South. 83 [(1889)].)

The contention that said section 4 is unconstitutional, for the reason that the license tax is not the same on each person engaged in selling intoxicating liquors, is fully answered by the authorities last above cited. Under said act the license tax is graduated by the number of votes cast for governor at the last general election next preceding the date of the application for a license. If the total vote cast for governor at such election exceeds 150 votes, then the applicant is required to pay a license of $500 per annum; and if such vote did not exceed 150 votes, then the applicant must pay $300 per annum. The act in question is a police regulation, and, as such, the price of licenses may be graduated as indicated therein. In Ex parte Marshall, 64 Ala. 266, Justice Stone, delivering the opinion of the court, says: "Inasmuch as the price of a license may be graduated by the populousness of the community in which the privilege is to be exercised, and by the profitableness of the employments, amusements, games, etc., it authorizes, this assessment is not obnoxious to the objection that it is not levied equally throughout the taxable district." (See, also, East St. Louis v. Wehrung, supra; State v. O'Hara, 36 La. Ann. 93; New Orleans v. Railroad Co., 41 La. Ann. 519, 7 South. 83; Gross v.

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